South Asia countries will dramatically lower tariffs in the coming years, SAARC member countries announced on the eve of their annual summit meeting. .
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Under the “South Asian Free Trade Agreement” SAFTA), India, Pakistan, Bangladesh, Sri Lanka, Nepal, Buthan and the Maldives would cut import duties to 0 to 5% depending on items. .
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Tariffs will be progressively lowered form 1 January 2006. India and Pakistan will cut tariffs over a 7-year period while Sri Lanka will have eight years to reduce its barriers. As Least Developed Countries (LDCs), Bangladesh, Nepal and other SAARC members will be offered a 10-year transition.
The seven nations will now negotiate the list of sensitive products that will be excluded from the liberalization process. .
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Regional trade in raw materials and semi-finished products would be generally liberalized while finished products would still be subject to high duties. .
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India textile industry fears a surge in imports from Pakistan while Bangladeshi textile producers could also try excluding Indian yarns and fabrics from the benefits of duty reductions. .
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Forming an integrated textile area would help regional apparel exporters in competing with China on US and EU markets, on the other hand. .
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In South-East Asia, ASEAN member countries are already slashing tariffs under the so-called AFTA.SAARC negotiators are expected setting tariff quotas with limited quantities of yarns and fabrics enjoying lower duties while usual tariffs will still be applied above levels. .
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India and Sri Lanka are already implementing a bilateral duty-free agreement with similar tariff rate quotas. .
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Regional textile trade was until now limited by very high tariffs imposed by India and Pakistan in addition to political tension between the two countries. .
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Difficulties in directly importing goods forced companies in developing trade through a third country, mainly Dubai. .
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More than SAFTA implementation over the coming years, an improvement in relations between India and Pakistan could help in reducing costs, industry associations made it clear. .
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On the sidelines of the SAARC summit, Indian Prime Minister and Pakistani President Monday announced that negotiations would soon resume between the two countries. .
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Air transport is being restored while access by roads could also be allowed. .
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With transport costs sharply falling as a consequence and tariffs being slashed under SAFTA, bilateral trade could rapidly expand in the coming years thanks to lower costs and lower delivery time.Pakistan is expected importing low-cost textile machinery from India in order to boost productivity in the post-quota period. .
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Pakistani spinners already began buying Indian cotton in order to offset the low level in Pakistani crop this season. .
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Bangladesh Prime Minister Khaleda Zia this week offered Indian textile groups to invest in her country. Bangladeshi apparel exporters are already importing yarns and fabrics from India since local textile industry is far from covering their needs. .
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Apparel exporters in the region could take advantage of the development of multilateral textile trade. Industry associations already suggested to form a consortium to forge alliances in the post-quota era. .
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The new consortium would help in developing new textile materials while offering more facilities to boost exports.
Date:1/7/2004
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